The cost of buying a home in the New Orleans area climbed for the third year in a row in 2014. And it was not just the city, but the suburbs as well, that saw gains.
Meanwhile, in the city proper, the latest figures showed that the market has gotten so hot in more desirable neighborhoods that buyers have started scooping up even the more run-down properties. The price of homes in poor or fair condition last year spiked in certain ZIP codes.
Across the region, sales of single-family homes in average or better condition climbed 3.1 percent, to $114 per square foot, last year, compared with $110 in 2013. Those figures compare with an average price of $102 per square foot before Hurricane Katrina in 2005. Considered another way, a 2,000-square-foot home now sells for an average of $228,000 in the metro area. It would have sold for an average of $220,000 last year and $204,000 before the storm.
“It is a good news story because … all the suburbs are now beginning to rise in price,” real estate consultant Wade Ragas said. “No longer is it that Orleans Parish is doing great but the rest are not yet recovered. It’s now, we’re in a second full year of recovery across all of the suburban parishes.”
The sales numbers are based on Ragas’ analysis of data from the New Orleans Metropolitan Association of Realtors and Gulf South Real Estate Information Network. The findings are intended as a market snapshot, not an estimate of the value or likely sale price of homes. The data do not include sales of multifamily homes, townhouses, condominiums and vacant lots.
As is typically the case, Orleans Parish homes in acceptable or better condition commanded the highest dollar at $153 per square foot on average. That’s unchanged from 2013.
Four ZIP codes spanning the Warehouse District, Lower Garden District, Uptown and the French Quarter received well over $200 per square foot on average for single-family homes, according to Ragas’ report.
To put that in perspective, Orleans Parish homes sold for about $114 per square foot on average before Katrina.
Despite the climb in price per square foot, the average home price actually dipped to $309,533 in 2014 from $325,348 in 2013. That’s because of an increase in sales of smaller homes, Ragas said. Last year, homes that changed hands had an average of 2,025 square feet, compared with 2,121 in 2013, That may be the result of smaller families and second-home buyers entering the market, said Anthony Posey of Anthony Posey Properties.
It could also represent buyers settling for a smaller space in order to find a spot in their preferred neighborhood, Ragas said.
In that vein, Ragas’ report revealed rising prices for homes that have not been repaired since Katrina. The price of homes in fair and poor condition rose 40.6 percent to $45 per square foot in Orleans Parish last year. The price per square foot nearly doubled in the 70118 area of Uptown and was up 134 percent in the 70119 ZIP code which includes Mid-City and the 7th Ward.
The average sale price of an unrenovated home was $71,845 in 2014, up from $52,669 in 2013.
In terms of homes in average or better condition, sales prices made the biggest jump in the 70119 ZIP code, which includes Mid-City and parts of the Treme-Lafitte and Seventh Ward neighborhoods. Homes in those areas sold for an average of $270,747 in 2014, more than $18,000 more than they commanded in 2013. The average price per square foot was up 12.2 percent to $163.
There also was double-digit percentage growth in the 70127 ZIP code of New Orleans East, a footprint that includes the recently reopened New Orleans East Hospital.
Properties in that ZIP code are also the most affordable in Orleans Parish, bringing in $70 per square foot on average.
Meanwhile, the neighborhood that had the highest home prices in 2013 was dethroned in 2014. The average price of homes sold in the 70116 ZIP code, which includes portions of the French Quarter, Treme-Lafitte and the 7th Ward, fell sharply from $268 per square foot to $218 per square foot. The average home sold for $450,115 in 2014, compared with $608,882 in 2013.
On the other hand, the 70115 ZIP code in Uptown saw average price per square foot rise to $240 from $223, making it the most expensive neighborhood for single-family homes in New Orleans last year.
Other areas saw big gains as well. The seven parishes surrounding Orleans Parish, most of which had seen slumping sales since at least 2010, continued a rebound that began last year. Home prices were either up or flat everywhere except St. John and Plaquemines parishes.
Jefferson Parish home prices rose 2.3 percent to $104 per square foot in 2014. That’s just under the pre-Katrina average of $105 per square foot.
St. Tammany Parish, which faced falling home prices in 2010, 2011 and 2012, continued a climb that began last year. Prices rose 3.8 percent in that parish to $108 per square foot, well over the pre-Katrina average of $103.
Home prices were also up 1 percent in St. Charles Parish and 6.9 percent in St. Bernard Parish. There was no change in price in Tangipahoa Parish. Home prices declined by 2.5 percent in St. John Parish and by 8 percent in Plaquemines Parish.
Areas where prices continue to struggle nearly 10 years after Hurricane Katrina reflect the fact that populations are still down since Katrina, Ragas said.
“I think that it’s first an acknowledgment of how hard it is to recover unless you recover all of the population,” Ragas said. “To get the housing prices back you have to restore the household demand for housing. … If the population recovers fully, the house prices recover fully. It’s that simple.”
Ragas said he believes a city program announced this week could help to repopulate and lift home prices in sagging areas. Mayor Mitch Landrieu’s administration announced Monday that more than 3,000 properties taken over by the city because of unpaid taxes will be offered for sale at auction beginning this summer.
Winning bidders will be allowed to purchase the full legal ownership of the tax-adjudicated properties.
“It’s going to allow both first-time buyers and others to get a house and renovate it cheap. It’s going to allow builders to renovate” or to buy and tear down, Ragas said. “I think this is a terrifically gutsy move by the city, and it’s really smart.”
Still, Ragas said the modest growth that New Orleans has already seen suggests that the gains are sustainable. The metro area’s performance has not kept pace compared with cities across Texas or on the West Coast, where home prices can shoot up in excess of 9 percent in a year, Ragas said. The slower annual growth here, Ragas said, suggests that the local market is not a real estate bubble.
“I’m not seeing any kind of bubble phenomenon here,” Ragas said. “Even though we’re in our sixth or seventh year of expansion, I’m not seeing anything that looks like a bubble.”
The only potential hiccup would be if falling natural gas prices send oil and gas companies that have promised to build huge industrial factories along the Mississippi River packing.
“If that were to start happening it would weaken demand for housing,” Ragas said, adding that there is no evidence so far to suggest that type of decline is imminent.